To drive impact in palm oil derivative supply chains and encourage collaboration within the industry, Earthworm Foundation created a palm oil derivative working group in 2020. This followed extensive experience with responsible palm oil sourcing since 2010 and a focus on derivatives starting in 2018.

Through this group, eight companies align needs, share knowledge, and collectively engage key suppliers and supply chain actors to drive positive change. Some companies involved include Colgate-Palmolive Company, Givaudan, Groupe Rocher, PZ Cussons and Reckitt.

Palm oil derivatives are found in various consumer products and industrial goods, from shampoos to flavours to detergents. According to some estimates, close to 60% of palm oil and palm kernel oil are used to produce derivatives.

Despite this, they have not received the required attention and effective inclusion in the industry-wide No Deforestation, Peat and Exploitation (NDPE) approach. This relies upon the origin identification of the oil used and cannot be achieved solely through certification.

Achieving traceability in derivative supply chains can be challenging due to their complex and opaque nature.

“Palm derivatives are often bought in small quantities from many suppliers, which means that companies lack the commercial leverage on their supply chain to ask for more transparency about the origins of the palm and palm kernel oil," Jhon Munoz, Supply Chain Sustainability Manager at Earthworm Foundation says.

The result is palm derivative customers struggle to achieve similar targets of traceability and due diligence as those buying crude palm oil and palm kernel oil. This hinders companies' efforts to improve environmental and social practices on the ground and achieve their responsible sourcing commitments.

"Collective action is a good way to tackle the issue. We focus on engaging key suppliers to enhance transparency and support the achievement of NDPE policies," comments Robin Hobkirk, Project Manager at Earthworm Foundation.

Ten key suppliers have been identified who supply all or most of the companies involved. Each of the group's member companies leads the engagement with one of the key suppliers on behalf of the group.

It is important that they do not fully outsource this engagement to an external organisation, leading to a more participative approach, Robin says. "Discussions with suppliers are held in an open and constructive way to understand suppliers' challenges within a non-collusive and anti-competitive framework. This approach is useful for suppliers as they can hear first-hand their customers' expectations and policy requirements through discussions rather than being pressured through email."

The group's approach is to:

• Increase transparency and connections between actors, as this is a key enabler of transformation, with a "no black box secrecy of supplier connections" approach that is crucial to address grievances and satellite monitoring and verification;
• Address environmental and social grievances in companies' supply chains linked to the focus suppliers;

• Use an on-the-ground approach to address grievances, where necessary, and bring about positive transformation.

Munoz states, "With shared derivative supply chains and a shared need to implement their NDPE policies, the companies involved want to complement their supplier engagement efforts and work together to inspire greater impact and faster change within palm oil derivatives supply chains. They also want to share a consistent and unified message of expectations and needs from suppliers".

To support driving positive change on the ground, all members contribute to one or more of Earthworm Foundation Landscapes Programmes, including Indonesia (Riau and Aceh), Malaysia (Sabah and the Southern Central Forest Spine [SCFS]), Côte d'Ivoire (Soubré), and Mexico (Chiapas).

Each Landscape identifies and brings together key stakeholders that live and work in these areas, involving both upstream and downstream company players, local governments, local civil society, and local communities. The aim is to find compromise solutions that will allow for needed economic development, preservation of habitat, and lasting ecosystem services.

Whilst achieving NPDE for derivatives is challenging, our members are achieving good progress within the complexity of opaque supply and a large number of mills.

“Through our commitment and integration in our procurement practice, we have achieved 52% TTP (Traceability to Plantation) and have verified, through Starling satellite monitoring, that 42% of our palm oil is deforestation-free. This includes palm oil derivatives and fractions, as well as third-party suppliers," says Joanna Gluzman, Chief Sustainability Officer at PZ Cussons.

"Combined efforts and continuous improvement are the only way to progress on difficult yet important ingredient supply chains like palm oil derivatives. Learnings from this work can further help all the member companies and wider industry to initiate more joint projects and gradually progress on other similarly complex ingredients supply chains," explains Adit Sharma, Head of Responsible Sourcing at Givaudan.

"Beyond the participation to the Derivative Group, collaboration between companies is fundamental to transform supply chains. The improvement of living and working conditions and biodiversity respect is allowed through the support of Landscapes programmes, like in Sabah, that gathers several companies using palm oil derivatives like Groupe Rocher," adds Jeanne Lucas, CSR and Quality project manager at Groupe Rocher.

The palm oil derivative working group, formed by Earthworm Foundation, is actively driving positive change within palm oil derivative supply chains. Through collaboration, transparency, and on-the-ground approaches, the group's member companies aim to achieve their NDPE policies, address environmental and social grievances, and inspire greater impact and faster change in the industry.

With their collective efforts and shared commitments, they are progressing in promoting responsible sourcing and achieving traceability within the complex supply chain of palm oil derivatives.